Lee County could lose $134 million

Memo says what happens if it loses all 130 civil cases against it.

Jul. 20, 2013

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The Lee County commission faces more than $134 million in legal liabilities, primarily stemming from land disputes – eminent domain and zoning cases.

Lee’s 130 pending civil cases and other possible looming legal liabilities were detailed in a recently released memorandum from the county attorney’s office. The cases, interim County Attorney Andrea Fraser said, should be settled in the next four to five years.

County Manager Roger Desjarlais said the figures represent a worst-case scenario that assumes Lee would sustain hefty losses in many cases.

“All of them have a big number attached to them,” Desjarlais said. “I can’t discount the number completely that’s in this memorandum.”

Nonetheless, Desjarlais said, it’s important to monitor the risk as Lee, in many cases, has covered legal losses from its property-tax supported general fund reserves.

With deficit spending set to drain Lee’s reserve fund to about $81.7 million by Sept. 30, Commissioner Larry Kiker said it’s imperative officials understand expenses that aren’t in the budget.

“To me, that’s a big, big step we just took in Lee County in terms of getting our hands around the budget,” Kiker said. “We’ve settled for millions of dollars on properties and it was never budgeted for at all. I think this is a big deal we’re having the conversation right now.”

Lee’s budget deficit for the fiscal year that starts Oct. 1 stands at about $32.8 million. Commissioners will set property tax rates for the upcoming year when they return from recess July 30.

Land cases

Of $134 million in estimated liabilities, 97 percent, or $130.3 million, stems from land cases: mostly efforts to acquire land for public projects or zoning decisions.

Underlying Lee’s largest legal liability at $61 million is the commission’s decision to cut development rights on Pine Island. Pending lawsuits make up about $20 million of that figure, while the county attorney’s office estimates another $41 million could be claimed by impacted property owners.

Pine Island landowners claim their property rights were destroyed when commissioners increased the amount of acreage needed to develop a new home.

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The restrictions were pushed by residents, who attended commission meetings, claiming Pine Island lacked public works to support its capacity for new homes and residents.

“You have a few people who speak up and complain because they don’t like a certain project or development,” Commission Chairman Cecil Pendergrass said. “I think in the future when the board makes decisions in zoning cases we have to be more cognizant of property rights and follow our own land use codes.”

Pendergrass was elected in 2012 after the restrictions were put in place.

Taxpayers are on the hook for $6 million after commissioners in 2008 sided with Estero residents who opposed plans to build a Home Depot, shopping center and residences on 48 acres at Corkscrew Road and Three Oaks Parkway.

Although the developer, Estero Place LLC, won approval from Lee County planners, Estero residents feared traffic congestion and the potential for the project to change the area’s character.

Another $8.21 million could be lost in a court fight with Buckingham Village. The developer was awarded $4.6 million at trial in 2011, but Lee is appealing.

While the developer’s 2004 effort to build 374 homes and 232,500 square feet of commercial space on 81 acres in the east Lee County community was approved by the commission’s hearing examiner and planners, the Lee County Commission rejected the development in 2006.

While 19 pre-litigation notices have yet to become lawsuits, six civil actions have been filed. They could cost Lee an estimated $21 million.

Desjarlais said he suspects some of those claims could amount to little more than wishful thinking on the behalf of property owners hoping for a payday.

“I’ve seen really outrageous methodologies in the past,” Desjarlais said of how property owners and lawyers calculate their alleged damages from flood insurance rate maps.

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Lee also faces litigation from its efforts to widen roads.

Taxpayers are on the hook for up to $6.4 million after county lawyers last year lost a court ruling that effectively set property values along Burnt Store Road at the height of Lee’s real estate market in 2005-06.

Lee County plans to add four lanes to the two-lane road that runs along Cape Coral’s western section north into Charlotte County.

With five properties in litigation and the likelihood of top-dollar appraisals because of the ruling, Lee will wait on the appeal before moving ahead with plans to acquire another 32 parcels needed to complete current plans. Officials need to buy 22 of those properties and start construction by June 2015 or risk losing a state grant for $2.8 million.

Alternatively, Lee could consider scaling back plans and widening Burnt Store to four lanes — a concept Lee has enough right-of-way to complete. But Department of Transportation Director Dave Loveland has said such a move would require new designs and permits. Lee has spent more than $2.7 million designing and permitting the road for up to six lanes, according to county documents and officials.

Reserves low?

Lee set aside about $3.5 million next year to pay for workers’ compensation, personal injury and other claims, Lee County Risk Manager Mike Figueroa said. Last year, Lee budgeted about $3.7 million. The set-aside amount is based on Lee’s historic propensity to rack up liabilities, Figueroa said.

Desjarlais, who recently was appointed county manager, said he’ll be examining Lee’s legal fights as reserve funds are set to hit critical lows in about 14 months — just enough dollars to pay Lee’s bills through the first few months of the fiscal year before property taxes start rolling in.

“If our undesignated reserves are at that level and we have unfunded litigation liabilities, it has to be very carefully managed, the litigation and the costs and the decisions made by the attorneys and the business units that are affected,” Desjarlais said.